New York Fed President: The Fed's decision to halt balance sheet reduction was based on market signals

John Williams, president of the Federal Reserve Bank of New York, said that recent volatility in the overnight funding markets indicates that the Fed's bank reserves are nearing their ideal level. In prepared remarks for a conference in Frankfurt on Friday, Williams stated, "Based on the recent continued pressure in the repo market, and other increasing signs that reserves are shifting from 'ample' to 'adequate,' I expect we will soon reach an adequate level of reserves." Williams also stated that he expects short-term liquidity tools such as the Standing Repo Facility (SRF) to continue to play a "key role" in the money market to ensure that the federal funds rate remains within the target range set by policymakers. He said, "I fully expect the SRF to continue to be used aggressively in this manner to curb upward pressure on money market rates." (Jinshi)